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Monday, January 13, 2014

My Suggestions - Part 2

Before we get started let's do the lessons - (again)
1) There is no government money. If you have questions on this point, I have many posts here where I expound upon this thought. Just suffice it to say that ultimately all money comes from the public (you and me).

2) Corporations and businesses do not and cannot pay taxes. Same comment here - lots of posts explaining this. Bottom line - only people pay taxes. Businesses just get the taxes by raising prices on their customers (you and me again).

3) Term limits are critical to any meaningful changes to be made in our government. This includes the bureaucracy that exists today in Washington that holds a lot of the real power.

In Part 1 I had two suggestions:
1. I suggested that we raise the voting age to 21. To encapsulate it succinctly - I cannot believe that any sane person thinks it takes more maturity to decide to drink an alcoholic beverage than to decide who will govern us.

2. I also suggested we consolidate and/or eliminate many government departments and cabinet positions. Note: I did not suggest we eliminate any programs (that is coming), just departments and management of said departments. More details can be found in the previous post. Thoughts and comments are welcomed.

Now for the new stuff -

3) I would raise the maximum income for the cutoff of Social Security contributions. I would either make it like the Medicare tax and have no cap or take it dramatically higher than it is now ($117,000). To help out lower income folks I would cut the rate from 6.2% (it is actually 12.4% with half from the employee and half from the employer) to 5%. I would also means test for any Social Security payout. I know the arguments - "I paid in! It is my money!. They are valid. But since Social Security has morphed into something it was not designed to be - a retirement plan (WHAAAT!! You say?!? I was not a retirement plan? No. In fact it was presented as a small government stipend to help the less fortunate survive old age among other things. But, that is another subject) If a person does not need Social Security income they should not get it. I know "does not need " is relative and I do not claim to have the wisdom to tell you at what level exactly it would not be needed. But, I know there are people receiving Social Security payments every month that could do very well without the checks. Everyone knows Social Security is a train wreck waiting to happen. No one has the cajones to do anything about it. We must do something or it will disappear or bankrupt us.

4) Still staying with Social Security, I would move to privatize (or partially privatize) the funds. Maybe start with anyone under 50 (or make it voluntary for anyone over 45 - whatever is decided). At some point everyone would have at least a portion of their Social Security withholding invested in stocks and/or bonds. I know the uproar that occurs here - "Why expose our retirees to the volatility of the market? What if this had already occurred in 2008!? FYI, the last time I checked the stock market had NEVER had any ten year period that was down. If reinvestment of dividends is required that would insure so. This would require a lot of work so that the immense amount of money flowing into the market would not disrupt things or go to scam artists (including politicians!). If we work on it, it could be done. If this had been done for my generation in the 70s I would have no issues with retirement on my Social Security. It would be a fortune.

5) I would eliminate baseline budgeting. I would guess most of you don't even know what this one is. Baseline budgeting is how our government computes spending. The amount of tax revenue coming in and the spending taking place is extrapolated and computed considering the inflation rate (and anticipated inflation rate for future periods) and population growth (or anticipated population growth for future periods). If we are spending a billion dollars today on a program that is being budgeted going forward and it is thought inflation would be 3% per year with a 1% population growth rate per year, then in the tenth year we would be budgeting to spend $1,437 billion - almost 44% more. Now in Washington speak - that would be a flat, no growth budget. It doesn't matter if inflation was less (or more), or if the population was flat or went down (or up). If someone suggested that we only spend $1.2 billion (a 20% increase over the start number) that would be seen as a 16.5% CUT! FYI, all the "cuts" that the Republicans have suggested were not actually cuts to anything. They were cuts in the proposed increases in spending! Each department/program should be required to justify any funds allocated every year. If my idea from #2 in Part 1 was taken up, combined with this approach we would save trillions over a decade!

I will stop now. Please comment. Part 1 comments welcomed as well. As always, all comments will be published as long as they meet civility criteria.